Market Wrap: Bitcoin Sellers Return, Reversing Earlier Gains

Bitcoin (BTC) and other cryptocurrencies struggled to maintain earlier gains on Wednesday, although alternative cryptocurrencies such as Cosmos' ATOM, Shiba Inu's SHIB and Polygon's MATIC rose as much as 9% over the past 24 hours, compared with BTC's flat performance over the same period.

Meanwhile, the rise in stablecoins could indicate a flight to safety among traders who are seeking protection from market volatility.

Equities also declined on Wednesday, while traditional safe haven assets such as gold and the U.S. dollar rose. That could mean investors are still concerned about macroeconomic and geopolitical risks. On Wednesday, Ukraine declared a state of emergency and urged its citizens to leave Russia immediately as tensions between the two nations escalated.

Latest prices

●Bitcoin (BTC): $37683, −0.67%

●Ether (ETH): $2624, +0.80%

●S&P 500 daily close: $4226, −1.84%

●Gold: $1910 per troy ounce, +0.22%

●Ten-year Treasury yield daily close: 1.98%

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Monitoring selling pressure

Blockchain data shows a majority of short-term bitcoin holders have a cost basis of between $42,000 and $50,000. Therefore, recent fluctuations in prices below $50,000 could cause some anxiety among traders as losses add up.

Glassnode, a crypto data firm, estimates that more than a quarter of all Bitcoin network entities are now underwater on their position.

"If the market fails to establish a sustainable uptrend, these users are statistically the most likely to become yet another source of sell-side pressure, specially if price trades below their cost basis." Glassnode wrote in a blog post.

The firm also noticed short-term holders purchasing bitcoin in recent weeks, with an average cost basis of $33,500 to $44,600. Still, for now, buying volume remains low, which means recent bids from short-term holders aren't enough to trigger a sustained upswing in price.

Altcoin roundup

• Stablecoin’s bull market continues: The supply of stablecoins continues to grow even as the broader crypto market remains depressed. CoinGecko data shows the market capitalization of stablecoins has risen above $180 billion, marking a 32% jump from the tally of $141 billion observed before the crypto market peaked in mid-November. Read more here.
• Terra’s LUNA jumps: Buoyed by positive news, LUNA, the native token of the smart contract blockchain Terra, has jumped 13% in the last 24 hours. Other notable gainers on the list of coins with at least $1 billion market value are Cosmos’ ATOM, up 7.2%, and Avalanche's AVAX, up 5.6%. LUNA's leadership perhaps stems from a decision by Singapore-based nonprofit organization Luna Foundation Guard's (LFG) to create a bitcoin-denominated reserve as an additional layer of security for UST – Terra's decentralized stablecoin, whose value is pegged 1:1 to the U.S. dollar, according to CoinDesk’s Omkar Godbole. Read more here.
• StarkWare launches Layer 2 product StarkNet on Ethereum: StarkWare's layer 2 product for the Ethereum blockchain – StarkNet – is ready for the deployment of decentralized apps (dapps), the company said. StarkNet uses zero-knowledge (ZK) rollup technology to solve Ethereum’s scaling problem, according to CoinDesk’s Sam Reynolds. Read more here.

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Other markets

Digital assets in the CoinDesk 20 ended the day slightly higher.

Largest gainers:

Asset Ticker Returns Sector Cosmos ATOM +7.2% Smart Contract Platform Polygon MATIC +5.3% Smart Contract Platform Cardano ADA +3.4% Smart Contract Platform

Largest losers:

Asset Ticker Returns Sector Bitcoin BTC −0.6% Currency Chainlink LINK −0.6% Computing Filecoin FIL −0.5% Computing

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.